organisation structure of lic
TRANSCRIPT
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Chapter 12
ORGANISATION STRUCTURE
Presented by Smt.Pushpa N. Rajput
AAO(Investment)Central Office
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INTRODUCTION
Organisation structure refers to arrangementsmade for smooth running of Business activities.
The arrangements depend on the nature and
extent of business e.g. a shop, a partnership
firm, a co-operative society, a factory, etc.
It involves identifying the important activities
and grouping them according to similarity,
relatedness and importance. e.g. revenuegenerating activities are more important that
non-revenue generating activities and
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Customer related activities are more important
than internal administration related activities.
Grouping of activities leads to formation of
offices, departments and sections.
Responsibilities & Authorities are defined and
delegated to people and their position,designation, places in offices are fixed. e.g. an
officer or a supervisor will be given the
responsibility of doing a particular job and will
be given the authority to get the job done fromhis subordinates or clerk
An organisation is then said to be in place.
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IMPORTANT ACTIVITIES
The important activities in a life insurance companyare:
Procuring applications or proposal of insurance fromprospective buyers
Underwriting i.e. scrutinising the proposals andtaking decision on the proposals
Issuing policy document incorporating the terms andconditions of the risk cover.
Monitoring the performance of insurance contract by
either party, like payment of premiums Attending to various requirements that may arise
during the duration of the contract like assignments,nomination, alteration of terms, surrender & claimpayments.
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Other Activities : Advertising publicity of their product
Investment -- funds obtain from premium collectionare to be invested in the most profitable manner soas to maximise returns.
Accounting- recording all the transaction takenplace.
Personnel Management managing the staffrequirement, employing new people, training themand making payment of salaries and wages.
Data processing keeping and maintaining all therecords on the computer of the policies issued
Compliance of laws regulations abiding to therules and regulations.
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All the above activities are organised
depending on the size of operation i.e. Either these activities are concentrated in one
place
Or distributed between different offices.
Business transacted in different countrieswill have different organisation structure
depending upon the laws of that countryand market for business.
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INDIAN CONTEXT
Earlier many insurers hired specialisedagencies to do the administrative work.
These agencies managed various kinds
of business and were not aware of thespecial discipline required for insurancebusiness.
Life insurance business wasnationalised in India in 1956. Since thenLIC and PLI were doing life insurancebusiness until the year 2000
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Because in the year 2000 several new insurance
companies have started life insurance business.
Each Company has a different organisationalstructure i.e. different offices, authority,
responsibility vested on different positions.
LIC transacts business throughout India and also
in foreign countries like UK, Mauritius, Fiji, Kenya,
Nepal & Bahrain.
Own Offices - UK, Mauritius, Fiji,
Joint Ventures - Kenya, Nepal & Bahrain. Since 2000 only Indian companies are allowed to
transact insurance business & foreign insurers can
only be shareholders in Indian Companies.
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STRUCTURE OF LIC.
Central Govt. appoints not more than 16members of LIC.
Out of these 16 members 3 are full time
employees of LIC. 1 Chairman and 2Managing Directors.
These members are highest decision
making body of LIC, similar to the boardof directors of companies.
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4 TIER STRUCTURE OF LIC
Central
Office
7 Zonal Offices
100 Divisional Offices
2000 Branch Offices.
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PLI- Postal Life Insurance
Part of Central Govt. Directorate headed by Chief General
Manager.
Supervision and control of PostalServices Board.
District Postal Head Office looks after allPLI operations in a particular districtincluding sales and payment of claims.
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Premiums are collected by all postoffices but final accounting is done at
office of Director of Accounts in
Calcutta. Personnel attending to postal system
jobs also looks after the administrative
work of Postal Life Insurance.
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Organisation Structure of LIC
Until 1981, the Branch Offices only
procured new business and registered
the proposal and collected premium.
Divisional Offices did underwriting, issue
of policy, policy servicing
As divisional offices were few compared
to Branch offices, policy services proved
to be costly and time consuming.
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BRANCH OFFICE After 1981, Branch Offices did all the jobs
from acceptance of proposal to payment ofclaims.
Branch Office is the Basic unit of growth and
profit. Agents and Development Officers are part of
a Branch Office.
People are reluctant to buy life insurance asthey have to pay for a benefit which is vagueand far away. They are to be persuaded &this job of persuasion is done by agents.
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LIC has more than 6 lakhs agents. Agents of
other new insurance companies are called
advisors or consultants. In other countries, there are colleges of
Insurance which offer long duration courses
to leading agents to get degrees likeaccountant, company secretary or architects.
These courses are given because
professional agents advice are valued more. In India, there are organisation which offer
courses for agents in insurance related
matters
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BROKERS
Brokers canvass business and lace the same withinsurer on certain negotiated terms.
Broker does business for more than one insurance
company.
He collects commission from the insurer & does
not charge the customer.
In India, the system of brokers was not permitted
earlier, but now the IRDA has issued regulationsregarding operation of Brokers, which state that
Brokers have to obtain licenses from the Govt. in
order to procure business & receive commission
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Direct Selling
Life insurance has been sold mainly throughagents.
As part of the strategies to reduce costs,insurers are exploring various methods of
direct selling, thereby bringing down costs byeliminating the intermediary.
Through internet, buyers can access
information about various plans of insuranceand also the premium rates offered. Insurersare keen to take advantage of the newtechnology but are approaching it cautiously.
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New Insurance Companies
New insurance companies are managed by aBoard of Directors, of which one is therepresentative of customers.
They have two tier structure. Head office
Branch offices
Most companies have their own Branch Offices,however some have tied up with their associateorganisation mainly Banks, which has a large
network Branch offices concentrate on procuring business
and building clientele. Head office looks afterunderwriting and administering the policies.
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Internal Organisation
In an insurance office, departments areformed based on the following activities
Business development or Agency or
marketing procuring business New Business receiving, scrutinising
& underwriting new proposal and issue
of First Premium Receipts & Policy.
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Servicing Policy Holders
Monitoring premium payments. Lapses & revivals
Alterations, nominations, assignments
Surrender, loan & claim settlement Accounting financial flows
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Following departments are likely to be
centralised as they require specialised skills
Actuarial studying the experiences, doing
valuations, declaring bonuses on the with
profit plan policy, monitoring adequacy ofpremiums, setting underwriting standards,
studying mortality rate
Investments of funds studyingopportunities for maximising returns
Advertising, publicity & public relation.
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Some of the following departments will
be found in all offices, sometimes looking
after the needs of that office alone orsometimes looking after the entire office:
Personnel Recruitment of staff,
payment of salary, etc. Human Resources Development
Training
Purchases(of stationery, office
equipments,etc)
Administration for office upkeep
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The Actuarial Profession
An Actuary
is a person who has passed specialised examsconducted by the Actuarial Society of India or theInstitute of Actuaries , London
is the technical expert on life insurance mattersstudying the mortality of the insuring public.
evaluates the financial condition of the insurer Determines the policies to be offered and at what
premium rates.
Makes rules to follow for underwriting andinvestments of funds.
Decides the bonus that could be declared onparticipating policies.
A good actuary is a good economist, a goodstatistician and a good security analyst.
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Insurance Regulatory and Development Authority
(IRDA) Regulations requires that every life
insurance company must have an Appointed
Actuary, who will perform the following jobs :
Continuously study the companys operation and
advise them on the product design and pricing,
insurance contract wordings, investment andreinsurance.
Do periodical valuation of the company as per the
provision of the Insurance Act and ensure the
solvency of the insurer at all times.
Certify the premium proposed to be charged by
the insurer before submitting for approval of the
IRDA.
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Comply with the Act in regard to premiums,
values of assets and liabilities.
Certify the actuarial reports and other returns.
Certify the determination of the mathematical
reserves i.e proportion of the surplus to bereserved and the proportion to be distributed
as bonus.
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